Maruti, Hyundai aims to beat the cash blues

The two companies are hopeful of meeting their annual production targets despite a slump in demand after the government’s demonetisation moveKetan Thakkar&Lijee Philip | ET Bureau | Updated: December 23, 2016, 10:59 IST

Industry executives ET spoke with said the two companies are likely to top their internal targets on the back of significant order backlog for some models. Production at Maruti Suzuki may touch 1.58 million to 1.6 million units by the end of the current fiscal against the internal target of 1.565 million, said several people in the know of the plan.

RC Bhargava, chairman of Maruti Suzuki, confirmed that the company will meet its annual target by producing over 1.5 million units despite the demonetisation move, but declined to give an exact figure.

“We are doing better than others. After an initial blip in bookings in November there has been pick up in momentum of bookings. Clarity on annual numbers will emerge only by January. Continuous innovation and the ability to understand the customers' needs have helped us sustain our volume growth and market share over the years,” Bhargava said.

“Brand perception, ease of maintenance, spare parts’ cost, distribution and sales network, all play a big part going ahead in the future.”

The company is likely to end FY17 with a market share of over 47%, its highest in the last decade and a half. On the back of strong retail offtake in the festive month of October, Maruti Suzuki posted year-on-year sales growth of 14% in November, the same month demonetisation was announced.

The company said growth was on account of replenishing stock at dealerships which had thinned due to strong demand in October. A senior company executive said the car maker registered 30% year-on-year growth in retail in October, the highest so far for the company.

Maruti Suzuki is still sitting on inventory of close to 1lakh units, with Vitara Brezza having a waiting period of 20-24 weeks and Baleno of about 18-20 weeks. There will be a correction in dispatches in the final month of the calendar year, but schedules for the next three months are healthy — ranging from 130,000 to 150,000 units per month.

The incremental capacity is coming from the new Gujarat facility and stocking of Ignis, the launch of which is likely to bring in the incremental numbers.

Rakesh Srivastava, senior VP of sales and marketing at Hyundai Motor India, told ET his company is on course to meet 2016 target of producing 6,65,000 units and crossing the half-million units sales milestone in the domestic market this calendar year, which may be marginally better than the original goal.

Srivastava said demonetisation had a short-term impact, but the current ecosystem is geared up with strong offers from the company and support from financers to deliver good numbers. A strong product portfolio, flexibility and speed shown in terms of reacting to changing market has helped the company meet targets, he said.

“We don’t change targets despite change in market condition. We believe that as market leaders, we should have the ability to deliver original set goals in spite of changing market condition by showing flexibility and speed by using the product line up,” said Srivastava, “We have looked at newer segments of petrol SUV, institutional sales, shared mobility providers and deeper rural sales to offset challenges in traditional market segment.”